Brussels Airlines future and financial perspective

[EBAW_flyer]

The more friendly fiscal climate would be great for other Belgian companies (JAF and TCW) who are also complaining about this for years.

[Inquirer]

I think our government will want to avoid a well known company in which it still holds some shares to openly take steps to evade Belgian taxes, as that would really proof the unsustainablility of our social and fiscal system to the outside world, and so IMHO they will be coming up with something that formally keeps them in Belgium in future too all while effectively giving them much of the same benefits as if they had outflagged.

Let's face it inquirer, you can't be wrong with regards to Belgium's unthinkable and unsustainable fiscal policies. However, there is one exception with regards to this matter when we talk about SN's payroll.
In fact, at SN, it's not the company who's absorbing the burden of the unbalanced playing field but the employees.

If you really think that, you better start reviewing your social law course (if ever).
Gross salary is nowhere near the total employment cost of an employee in Belgium, so let's honnestly say both share some of the burden, shall we?

Besides, any well run company should do all it thinks is beneficial to its ballance sheet in order to improve its competitive position: if B.air can armtwist our government into giving them a significant tax break, than they'd be foolish not to do so: I say that is only further proof that B.air isn't run by complete idiots after all???

In fact I find that this way of alarming the customers in the important pre-summer travel booking period rather crazy

Yet the alarmists are only here, really.
As was pointed out already, De Tijd reported about a behind closed doors meeting in which a case is brought forward, the rest is just conjecture really added as time goes by. No need to keep on adding really, let's just see how this goes.

The more friendly fiscal climate would be great for other Belgian companies (JAF and TCW) who are also complaining about this for years.

Most certainly.
By the way, do we even know if Davignon was speeking solely on behalf of B.air at the cabinet meeting, or was he sent there on a wider mandate? It wouldn't be the first time Belgian airlines have teamed up to push a common agenda and given they have been working closely together on the pension reform plans lately, they may have found eachother on other fiscal topics too...

As said: too much conjecture has been added: sometimes a widespread problem needs a face before it is taken seriously.

A more unbiased view -stripped of all conjecture and emotions- can be found here:
http://www.deredactie.be/cm/vrtnieuws/e ... lsAirlines
including a radio interview with E. Davignon and S. Vanackere

[BrightCedars]

And what would prevent Brussels Airlines to create a subsidiary in Ireland or another EU member state with a more favourable fiscal climate to cover all its EU operations, and perhaps that under open skies agreements as well?

Oh, wait a minute, the unions will prefer to see the company written off than to allow for their members to be offloaded to a social system with lesser benefits.

I don't think the government needs to waste its time with this issue. Free market, same rules. Use them or else.

[Inquirer]

And what would prevent Brussels Airlines to create a subsidiary in Ireland or another EU member state with a more favourable fiscal climate to cover all its EU operations, and perhaps that under open skies agreements as well?

I think that is basically what Davignon has put on the government table as an alternative.

At least it sounds like it from the article in De Tijd and it would also explain why suddenly our government is eager to act in this field: even "before summer" according to S. Vanackere.

[fcw]

The story is out, BruAir on the edge of bankruptcy

Being a regular user of the said airline, I read the article in De Tijd and you seem to have taken the liberty to interpret the content of the news article quite freely to say the least....

Don't shoot the messenger!
De Tijd quotes Mr Davignon: "we hebben de regering op de hoogte gebracht van de precaire situatie"-
"we advised the governement about the critical situation"

[Inquirer]

The story is out, BruAir on the edge of bankruptcy

Being a regular user of the said airline, I read the article in De Tijd and you seem to have taken the liberty to interpret the content of the news article quite freely to say the least....

Don't shoot the messenger!
De Tijd quotes Mr Davignon: "we hebben de regering op de hoogte gebracht van de precaire situatie"-
"we advised the governement about the critical situation"

Allow me to say that is indeed something quite different than what you have made out of it, but okay: you have misuderstood the meaning of the words in the article at first and seem to accept they are off indeed on second reading, so enough said about it. Let's move on, shall we?

[airazurxtror]

B.Air complained by voice of its chairman E. Davignon to the federal government about the lack of a level playing field between airlines based in Belgium and airlines based elsewhere in the EU yet operating from Belgium and he warned them those artificially aggravated adverse operating conditions are not sustainable in the long run, something which is widely understood to be the case indeed, I think?
The good news is it seems the government is finally willing to work on a fiscal solution and has mandated Mr Wathelet to draw up an action plan to try to restore some of our country's competitivenes in the skies, possibly through a dedicated and more favourable fiscal regime for Belgian airlines and their flight crews.

Well, if the government "levels the playing field" for Brussels Airlines, Brussels Airlines will be able to bring their fares on the level of easyJet, if not Ryanair's ...

[b720]

The government should not give exceptions and exemptions to any one.. Either they lower taxes for
business and make the country competitive, or SN should move their headquarters to another EU country
where social security and taxes are lower..

[BrusselsAirlines]

I think that is exactly what has been discussed with the government...

[crlhub]

Why not relocate the headquarter in Luxembourg?A possible 'win win' situation, as taxes for employers and employees(as well as for corporations?)are much lower,if i'm not wrong?Flights op in BRU and headquarter in LUX wwith if needed a LUX-BRU connection if requested by law?

[b720]

Luxembourg might be an option.. they should simply loom for the best deal.. it might be Bulgaria or Romania..
That is the whole idea of the EU after all..free movement of capital, services, persons, etc etc...as longs as fiscal policies are not identical throughout the Union businesses are entitled to look for the best deal

[fcw]

Mr Davignon clarified the situation this afternoon. BruAir is not doing well but they are not on the edge.
http://www.standaard.be/artikel/detail. ... 120321_112

He wants a level playing field.
The EU is working on it though, in the future aircrew will be subject to social security in the country of effective basing. (moving HQ to Ireland or Luxembourg won't change anything for BruAir; FR crew based in CRL however will become subject to Belgian social security).
In many new double taxation agreements aircrew are made taxable in their country of residence and not anymore in the country in which the HQ of the airline is located. (eg: of friend of mine is a pilot for Ezy based in France, from 1st January 2013 he will have to pay taxes in Belgium).
All projects of relocation are short time solutions only. In the long run the crew wil pay for it, as they did by loosing the their special pension because the pension contributions where used to subsidise the airlines instead of funding the pensions.

[sn26567]

Is it a consequnece of the bad financial situation? In any case, Lufthansa is unlikely to buy out Brussels Airline this year, according to ATWonline.

Lufthansa (LH) will most likely not buy the remaining 55% of Brussels Airlines (SN) this year, LH chairman and CEO Christoph Franz revealed.

Speaking to ATW at the lunch of the European Aviation Club in Brussels on Tuesday, Franz said: “Our strategic commitment [to SN] is clear, but we are not in a hurry to exercise our call option. We still have another two years to do so. At this point of time the priority is on our bottom line.” LH Group reported an adjusted operating margin of 3.4% for 2011, which it wants to increase (ATW Daily News, March 16).

In September 2008, LH bought 45% SN’s parent company, SN Airholding for €65 million via a capital increase (ATW Daily News, Sept. 25, 2008). As part of the agreement, LH has an option of acquiring the remaining 55% from 2011. The option can be exercised during three weeks in April.

Franz also confirmed that “if necessary we will offload more loss-making airlines in our portfolio. We started to offload loss-making carriers last year, with the sale of bmi to IAG, we closed Lufthansa Italia and withdrew from Jade Cargo.”

The sale of bmi to International Consolidated Airlines Group (IAG) is under review by the European Commission, which is expected to announce March 30 if it will approve the deal or open a more in-depth Phase 2 investigation. LH and IAG have offered remedies to address anti-trust issues.

Franz declined to comment to ATW on the nature of the concessions and said LH will review the future of bmi in case the EC prohibits the deal. According to the Sunday Times, LH is considering shutting down bmi if the sale to IAG is held up by anti-trust authorities in Brussels.

[BrightCedars]

I'm far from wishing SN's death, quite the opposite. But the European free market is dynamic enough to allow small players to die or bloom without State intervention. I wonder however what would happen in case a much larger carrier were to bite the dust à la Pan Am. Air France and Lufthansa for instance are very big to be missed.

I don't even believe it was crucial to set up Brussels Airlines after the demise of Sabena.
This said, the opportunity of a leaner carrier was on the table with the DAT subsidiary.
I also think that it was more vital for Africa to keep operations there at that point in time than it was in Brussels where the competition would quickly have filled the void, they did in part anyway.

However I do admit that the airline industry in the EU is one of those particular folds of the single market where the open competition is alive and kicking. I'm not going to go get my private car serviced in Romania because it's cheaper there. So that calls for some specific adaptations to ensure competition is fair wherever you are based in the area.

[BrightCedars]

Franz declined to comment to ATW on the nature of the concessions and said LH will review the future of bmi in case the EC prohibits the deal. According to the Sunday Times, LH is considering shutting down bmi if the sale to IAG is held up by anti-trust authorities in Brussels.

So LH rather close BD than sell it to VS instead of IAG?

Well, it would be foolish of them to say they'll buy this year if the can pull another perk from the government. I do think however their plan is to buy but paying the lowest price possible seeing a recent history of small profit and deepening losses.

[Inquirer]

Thank you for posting that link, fcw.
As you now see, you've overreacted a bit this morning, but that can happen to us all from time to time.
Well recovered, my friend.

Anyway, that plan to change all double taxation agreements is a good step, but it still doesn't solve the key problem of the uncompetitively way too high Belgian taxes, does it? A change to the double taxation rules may in itself reduce the cost gap with for instance Ryan Air, yet it won't lower the employment costs for B.Air itself: to do so will still require dedicated measures like for instance a more favourable dedicated fiscal regime for Belgian airlines.

Interestingly enough, the implementation of such a dedicated more favourable regime may have immediate beneficial results not only to B.Air's financial results, but may also have positive results on employment at other Belgian airlines, like for instance TNT.

As such, B.Air may have found an objective partner in the Walloon government, who's going to be very willing to do everything it takes to saveguard as much as it can the thousands of aviation related jobs TNT has created in LGG, and being able to offer a tax break to TNT airlines is a method they will surely like, so you may count the PS/CDh on board for this one, as well as the OpenVLD/MR: which liberal is going to oppose tax cuts for companies??

If a tax break of a couple of tens of millions per annum can help saveguard tens of thousands of aviation related jobs both in BRU as well as in LGG, then that would be money well spent IMHO: much more money has been spent on all sort of fiscal stimuli that haven't yielded nearly as many tangible results in the past (like the massive reduction of BTW/TVA in horeca for instance...)

[airazurxtror]

If SN is allowed to delocalize its personnel in order not to pay the taxes, why not other companies ? Why not, for instance, the SNCB/NMBS (Belgian railways) who are also in dire straits ? Why not Dexia ? Why not any or all of the Belgian companies ?
Is SN really worth uprooting the whole Belgian social system ?
In other words, do we really need to keep Brussels Airlines afloat at all cost, if it can't be profitable by itself ?
Allow me a sarcastic remark : it's very strange to see Davignon, an ultraliberal, heavy partisan of free enterprise, now being against competition and demanding the State help !!

[shockcooling]

just a quick reply, but airazurxtror, with which company is the NMBS competing in Belgium...

[saratoga]

Hi

I work ( read fly) in lux and pay my taxes overthere because my base is also lux. I don't understand how B air can move their HQ to lux and then operating out of brussels with people having a lux contract. ( hey i'm just a pilot, not a fiscalist). Regarding ryanair, they are selfemployed, so i do not understand the whole discussion.
Why should the government should accept an exception for b.air? There are also other companies suffering the fiscal regime. Sorry, all very unclear to me, but hey,i'm just a stupid pilot.

[Flanker]

Let's face it inquirer, you can't be wrong with regards to Belgium's unthinkable and unsustainable fiscal policies. However, there is one exception with regards to this matter when we talk about SN's payroll.
In fact, at SN, it's not the company who's absorbing the burden of the unbalanced playing field but the employees.

If you really think that, you better start reviewing your social law course (if ever).
Gross salary is nowhere near the total employment cost of an employee in Belgium, so let's honnestly say both share some of the burden, shall we?

Besides, any well run company should do all it thinks is beneficial to its ballance sheet in order to improve its competitive position: if B.air can armtwist our government into giving them a significant tax break, than they'd be foolish not to do so: I say that is only further proof that B.air isn't run by complete idiots after all???

I suggest you start reviewing the post. The exact term I used is:
Flight crew payroll cost is higher at FR than at SN

Flight crew payroll cost is the total cost to the employer this includes the gross salary and the employer's contributions. My social law knowledge is shiny clean, your reading skills, a little less than that

Starting F/O payscales (for reference only, from pilotjobsnetwork.com)
Ryanair
Basic salary 55 euro/block hour (max 1000 hrs / year)
Sector pay 24 euro/ block hour (after tax)

SN payscale
Basic salary 3400-3500
Duty pay 10 euro/block hour

If you compare all the payscales, the differences get larger and smaller depending on seniority.
Regardless, Ryanair's basic salaries are in the region of SN's, but they pay more duty pay, so that compensates for the higher social contributions burden.
In the end, FR will on average spend a little more money per crew per block hour than SN, but SN's crew will only receive about half the pay...
To me it's clear then that the flight crews are bearing most of the weight and not the company.

How does FR make it work with such high flight crew costs?
189 pax per aircraft at 90%, vs. SN 80-90 pax, 130/140/160 pax aircraft at 65%.

On the cabin crew front, the same can be said for people on the Ryanair contract.
All the rest are on "schijnzelfstandigheid" / "fake self-employment" contracts, where they rely on on-board sales commissions for a big part.

Besides, any well run company should do all it thinks is beneficial to its ballance sheet in order to improve its competitive position: if B.air can armtwist our government into giving them a significant tax break, than they'd be foolish not to do so: I say that is only further proof that B.air isn't run by complete idiots after all???

What's the achievable tax advantage, in the very unlikely scenario that it would materialize?
Let's suppose a whopping 1500 euro per pilot on average per month.
Let' suppose that the company doesn't share a dime of that tax advantage with its pilots and keeps it all to itself.
Per year, the savings would be less than 5 million euro's for flight crew.
I'm not sure what you could do about the cabin crew because due tot heir low payscales, they aren't paying that much taxes in the first place.

The potential savings for the first year went into smoke this morning thanks to that article.
What balance sheet advantage were you talking about?